Food and Fuel (or, Everything is Complex)

Over the last few days the question of whether government subsidies for ethanol are raising food prices--thereby causing poor people around the globe to starve--has arisen frequently.  First I heard discussion of this on the radio this weekend. Now the Times has published a good overview of the issues. 

Recently this was much less of a visible issue. Michael Pollan spoke about the ethical conundrums of ethanol when Helen and I heard him speak a few months ago. I had no idea what he was talking about at the time, but his argument that SUV drivers keep food from poor people by using corn-based gasoline stuck with me.  Not because I agreed with Pollan--to the contrary, his formulation struck me as trite and judgmental.

In essence, Pollan proclaimed the liberal orthodoxy on this issue. Allow me to paraphrase and read between the lines: those gas-guzzling SUV owners are so callous that they're willing to kill poor babies to enjoy more off-road thrills. 

As he spoke, I thought of an SUV owner at Helen's business school who is among the most socially conscientious members of the class. Her Facebook profile is ablaze with causes to support, and she participated in a socially conscious case competition earlier this year.  Given this counterexample I concluded that Pollan prefers the shortcuts of political activism: boiling complex interconnections down to ire-producing nuggets devoid of any context or substance. 

The Times story validates my viewpoint, if I do say so myself.  Yes, ethanol subsidies are a partial culprit for rising global food prices (and yes, SUVs are bad for the environment.) But so is a much higher global demand for meat (a sign of rapid incomes gains in some developing countries), as well as various droughts. Furthermore, wheat and rice prices--neither of which can be used as gasoline--have also risen rapidly. 

So it's not just corn snatched from the mouths of babes.

All this said, the rapid rise in food prices around the world is very worrisome. Thankfully the US just authorized $200 million in additional food aid--a pittance compared to the costs of the Iraq war, but $200 million more than used to be available. 

Of course this is a band-aid; more sophisticated adjustments to global food dynamics are necessary. Don't ask me what those adjustments should be.  All I know is that ethanol isn't the only culprit, and that SUV owners are too easy a punching bag.

Comments

[Markd]

Several years ago when congress and the Bush administration passed the bio-fuels subsidies to much acclaim, I remember thinking to myself at the time; “I wonder if people will feel so happy when their food bill goes up?” It is a certain economic truth, if you increase the demand for a commodity (in this case corn) then the price of that commodity will increase. Little noticed at the time, but a sign of things to come, within months of the passage of that legislation there were protests in Mexico due to a spike in the cost of tortillas (a food staple of Mexico’s poor). As for the price of rice and wheat, you are right Marcus, they aren’t used as a source of bio-fuels – but they are worthy substitutes for corn. The high price of corn caused food processors and consumers to switch to the other two. The result, the price for all three commodities has increased dramatically.

Unfortunately, bad luck played a part as well, severe drought in Australia drastically reduced Australia’s summer wheat crop. Droughts in America’s southeast only added to the supply problems.

As for your SUV friend, well I suppose she is no more guilty then the rest of us. But there is truth in the statement that if you put corn in the gas tank of a SUV (or any other vehicle for that matter) that is a little less corn available for the food supply.

[Wevbo]

Some good analysis here, Marcus. Thanks for devoting attention to this important issue.